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Understandably, many people do not like to think about their high their credit card balances. Some people are actually unaware of how much debt they have on credit cards. Researchers with the Federal Reserve Bank of New York published a report revealing that many people in the U.S. drastically underestimate the amount of credit card debt they owe. Not being aware of the extent of debts can have a negative impact on a person’s financial health and could cause a person to become overwhelmed by debt.
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Federal Reserve Bank Study
Researchers compared two sets of data in the study: responses to the Survey of Consumer Finances, which the study described as “the leading source of wealth data for the United States,” and credit report data from the credit reporting agency Equifax. Researchers looked at the amount of what people believed they owed on credit cards and what the credit reporting agency showed that people owed and found discrepancies.
About half of the survey respondents stated they believed they had credit card debt. However, the truth is that three-fourths of Americans have credit card debt. Many survey respondents also significantly underestimated the amounts of their debt. Single people underreported their debt by about 20 percentage points, while married people were about 30 percentage points off. Overall, Americans estimate they owe $391 billion in credit card debt, when in actuality the amount of credit card debt the nation owes is $820 billion.
Dangers of Underestimating Debt
Underestimating debt can lead to financial crises. Those who carry balances from month to month may believe that it will take them less time to pay off their balances than it actually will. They may also be unaware of the total amount of interest they will end up paying. Those who carry more debt than they believe may also think that they are able to take on more debt without problems, when in reality doing so can lead to financial ruin.
Consult an Attorney
Those who are overwhelmed with debt do have options. If you are struggling to pay your bills, talk to an experienced bankruptcy lawyer who can discuss your situation with you and advise you about what steps you should take to reorganize your finances. Contact us today and we will get you the help you deserve!